Retirement fears rise among older workers

Even traditional pensions don’t forestall financial worries

SAN FRANCISCO (MarketWatch)—The economy is sputtering back to life, but workers aged 50 and over have grown more fearful—both about their job security and their retirement prospects, according to a couple of new surveys.

What’s more, older workers are substantially more worried about their jobs and retirement than younger workers, according to an annual poll of more than 1,600 401(k) plan participants by consulting firm Mercer.

Fifty-nine percent of workers aged 50 and up said they may delay their retirement, a jump from 55% a year ago, according to Mercer. Among workers of all ages, the portion who expect to delay retirement rose to 44%, the highest figure in the survey since 2002—but the jump was driven entirely by the older workers. Of the younger workers, 37% said they expect to delay retirement, the same portion as said that a year earlier.

Also, 52% of all workers surveyed expect to work at least part-time in retirement, up from 47% who said that a year ago, but down from 59% in 2008. And 44% expect to reduce their standard of living, up from 38% who said that a year ago and 42% in 2008.

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About one-fourth of workers said they believe they’ll run out money in retirement. At the other end of the spectrum, about one-fifth said they’ll be able to leave money to family members of charities. Those figures have held fairly steady since 2006, according to the Mercer survey.

Even before the market crash in 2008, older workers expressed more anxiety than younger workers about their retirement security, and the worries have only grown more acute.

Their more recent heightened fear levels may stem simply from the fact that they have a shorter time horizon until retirement, said Suzanne Nolan, director of marketing and communications for Mercer’s U.S. outsourcing business.

“Many people experienced huge losses in the recent recession, and people either haven’t recovered completely or the reality has set in that they can’t count on the market to carry them over the finish line,” she said.

Another possible reason for retirement anxiety: greater awareness about health-care costs. “People are starting to connect the dots about funding health care in retirement,” Nolan said.

Pension plans don’t instill confidence

Meanwhile, even those workers who have a traditional pension plan—that is, a guaranteed payout in addition to their own savings—appear to be worried about the future, according to a separate survey by Fidelity Investments.

Seventy percent of baby boomers, including those with a traditional pension plan, said they wished they’d done more to save for retirement during their working years, according to the Fidelity survey of about 1,000 people who are either working in or recently retired from a corporate job.

A good chunk of people—20%—with traditional, defined-benefit pensions said they did no planning before retirement, according to the Fidelity survey.

“Even the small population of baby boomers who actually receive a pension payout today feel they should have saved earlier than they did for their income in retirement,” said Wendy Foster, senior vice president at Fidelity Investments, in a news release. “Saving more aggressively and planning well ahead of your expected retirement date becomes even more critical for the majority of Americans, particularly younger workers, without traditional pensions.”

Still, workers with traditional pensions are more prepared than their counterparts who are relying solely on their own savings: 65% of workers with pensions said they’ll retire at or before age 65, compared with 39% of workers without pensions who said that, according to Fidelity.

There is some good news: The Mercer survey found that older workers plan to increase their 401(k) savings rate. The bad news is that the average planned contribution, while significantly higher than the average of $6,926 a year ago, rose to just $8,242, on average, according to the Mercer survey.

That’s far from sufficient when you consider that about one-third of workers aged 55 and older have saved a total of less than $10,000, according to the Employee Benefit Research Institute’s 22nd annual retirement survey. Read more from that survey here.

Another 29% of workers aged 55-plus have saved $10,000 to $100,000, 18% have saved $100,000 to $249,999, and 22% have saved $250,000 or more, according to EBRI.

Mercer found that 13% of workers 50 and older plan to contribute the maximum possible to their 401(k) plan, or $22,500 in 2012.

Job fears rise, too

Older workers are also worried about their current job, according to Mercer.

The portion of younger workers (under age 50) who are worried about losing their job dropped to 36% from 46% a year ago, but job insecurity rose among people older than 50, with 36% saying they think they may lose their job in the next year, up from 34% a year ago.

That’s even as 73% of workers overall, up from 60% a year earlier, said they expect the economy to grow in the year ahead. “While people were feeling markedly more confident about the economy,” Mercer’s Nolan said, “they did not see how that positive outlook would translate into their personal circumstances.”

Older workers enjoy a lower unemployment rate than U.S. workers overall. The unemployment rate for workers aged 55 and up was 5.8% in November, according to an AARP analysis of government data. For workers of all ages, the nationwide rate dropped to 7.7% in November, from 7.9% in October. Read: U.S. creates 146,000 jobs in November.

The jobless rate for older men is higher than for older women: 6.2% in November, down from 6.4% a year ago. Women 55 and older saw their unemployment rate fall to 5% in November, from 5.8% a year earlier, according to AARP.

Still, when they lose a job, older workers tend to be out of work longer. In 2011, jobless workers 55 and older faced a median of 35 weeks unemployment, versus 26 weeks for those aged 25 to 54, according to a report in May from the U.S. Government Accountability Office.

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